IT enabled cultural retooling identifying value and routine discrepancies during enterprise systems pre implementation

... ES pre- implementation Literature Review 2.1.ES Pre- implementation The existing literature on the preparation and implementation of enterprise systems is rich Past research has conceptualized and. .. development of IT capability and their attitude 41 M.Sc Thesis – Mao Mao (A0092543E) toward integration The value and routine discrepancies combined and intertwined with each other and became cultural. .. perspective, during the ES pre- implementation stage, after identifying the value and routine discrepancies of the major participating subsidiaries, the IT and strategy development department soon found it

IT-ENABLED CULTURAL RETOOLING: IDENTIFYING VALUE AND ROUTINE DISCREPANCIES DURING ENTERPRISE SYSTEMS PRE-IMPLEMENTATION MAO MAO A THESIS SUBMITTED FOR THE DEGREE OF MASTER OF INFORMATION SYSTEMS DEPARMENT OF SCHOOL OF COMPUTING NATIONAL UNIVERSITY OF SINGAPORE 2014 ABSTRACT Cultural failings have been blamed as a major source of Enterprise Systems ES implementation failure; these derive from cultural misconstructions and resistance when IT is introduced Cultural retooling has been conceptualized as an effective method for overcoming cultural failings in organizations To achieve competitiveness and sustainability in a challenging environment, cultural retooling also enables competing organizations to translate external cultural resources into their own repertoire To understand cultural retooling, we chose an ES pre-implementation in a Chinese state-owned manufacturer as the context of our study For organizations to adapt a new technological approach, cultural retooling provides the “image, sense and capacity” for a new cultural background and thereby updates and aggrandizes the organizational cultural repertoires In this study, we aim to demystify cultural retooling by providing a concrete approach to identifying value and routine discrepancies By encourage congruent a identifying and these discrepancies, compatible early organizations attitude toward can ES implementation Keywords: Corporate culture, cultural retooling, ES pre-implementation, case study i DECLARATION I hereby declare that this thesis is my original work and it has been written by me in its entirety I have duly acknowledged all the sources of information which have been used in the thesis This thesis has also not been submitted for any degree in any university previously Mao Mao 28 May, 2014 ii ACKNOWLEDGEMENTS I would like to express my gratitude to my supervisor, Professor Pan ShanLing, for his invaluable guidance, advice and support throughout the course of this thesis Aside from my supervisor, I am also deeply grateful my family and friends for their support for my work and study at NUS iii CONTENTS 1.  Introduction 1  2.  Literature Review 5  2.1.  ES Pre-implementation 5  2.2.  Cultural Failings and Retooling 6  2.3.  Discrepancies 11  3.  Methodology 14  3.1.  Case Selection 14  3.2.  Data Collection and Analysis 16  4.  Case Description 20  4.1.  Requirements from the Headquarters 21  4.2.  Visions and Wishes from the Subsidiaries 25  4.3.  Current States of the Subsidiaries 29  5.  Case Analysis 33  5.1.  Discrepancies 34  5.1.1.  Value Discrepancy 35  5.1.2.  Routine Discrepancies 38  5.2.  The Role of the Subsidiaries 41  5.3.  Retooling Approach and Trajectory 45  5.3.1.  Instrumental Approach 46  5.3.2.  Integrative Approach 48  6.  Discussion and Findings 50  6.1.  Discrepancy Identification 50  6.2.  Retooling Role 52  6.3.  Retooling Approach 54  7.  Conclusion 58  7.1.  Theoretical and Practical Contributions 58  7.2.  Limitations and Future Research .60  Appendices I  Reference IV  iv M.Sc Thesis – Mao Mao (A0092543E) Introduction Cultural failings have been identified as a major difficulty when implementing IT (Leidner and Kayworth 2006) Cultural failings refer to internal cultural misalignments or conflict within the organization; they are usually triggered by a change in the external environment or the context, and they have been blamed as a major cause of organizational failures when importing new technologies or strategies (Kitchell 1995; Leidner and Kayworth 2006) Under the impact of cultural failings, the introduction of IT is often met with misconstruction and resistance (Coombs, Knights et al 1992; Tufte 2003) because the individuals in the organization feel awkwardness and disconnection toward new context Various studies have explored the transformation through which individuals enter into new cultural settings (e.g Castro, Barrera Jr et al 2004; Molinsky 2013b) For organizations to overcome such feelings, headquarters or the top management team must ensure that all subsidiaries and staff members adapt to the new cultural settings so that they can translate and effectuate external cultural resources compatibly into their own “cultural repertoire” (Swidler 1986 p 273; Harrison and Corley 2011) However, as Swidler also suggested, the process through which groups of people adapt into new cultural settings can be “drastic and costly” It remains difficult for organizations to retool their culture and adapt to a new context Prior studies have discovered the reasons for this difficulty: first, cultural change leads to uncertainty Uncertainty leads employees to feel M.Sc Thesis – Mao Mao (A0092543E) unsure about their work and development in the organization, which can generate resistance to change (Zwick 2002) Second, for large corporations, internal values among various subsidiaries might vary because each subsidiary has different goals and plans (e.g Delany 2000; Birkinshaw, Hood et al 2005) It can be difficult for the top management team at headquarters to overcome every subsidiary’s reluctance to participate (Pan, Pan et al 2006) Further, capability differences among subsidiaries can also determine their effectiveness in implementing ideas conveyed by headquarters Daily routines and business processes may vary greatly after the transformation (e.g Kilduff 1992; Hong, Easterby‐Smith et al 2006) In addition, flexibility and the ability to adapt to a new process vary among subsidiaries, especially in large corporations with versatile production lines and multiple hierarchies However, despite the difficulty and hardship of adapting to new cultural settings, empirical evidence has shown that various organizations have benefited from proactively pushing themselves to make this adaptation When competing in a challenging external environment, adapting to new cultural settings can allow firms to conceive of diverse strategies of action and form competitive responses (Rindova, Dalpiaz et al 2011) In terms of dissolving internal conflicts, cultural retooling, as a process of adapting to a new cultural context, also plays a critical role in developing collective identities within organizations (Fominaya 2010; Wry, Lounsbury et al 2011) and diminishing negative attitudes toward new technology (Cooper 1994) According to prior interpretations, cultural retooling has been generally viewed as a reactive autonomous response to changes of environment and climate (Smit and M.Sc Thesis – Mao Mao (A0092543E) Wandel 2006) However, prior studies tend to focus on the necessity and the advantages when enterprises adapt to new cultural settings; there has been little theoretical or practical demystification of the drastic and costly process of cultural retooling The urgency and hardship that can occur with cultural retooling particularly exist for competing organizations that are adapting to a new technological context New technological settings such as web technologies, e-commerce and enterprise systems (ES) might be completely strange to organizations that operate in traditional businesses such as agricultural production Internally, uncertainty regarding unknown technology is detrimental to confidence and solidarity among internal users (Chan and Pan 2008) For the top management team, after determining that the entire organization should adapt into a new cultural setting, the process of cultural retooling is necessary to proactively dissolve internal awkwardness and resistance toward the new context and replace it with a positive attitude toward new opportunities To understand the nature of cultural retooling, we have chosen the preimplementation stage of enterprise systems (ES) in a Chinese state-owned manufacturer as the context of our study This choice is appropriate because, diverging from the existing view of organizational cultural change, the process of cultural retooling as a proactive approach for adapting to new cultural settings can be revealed under a Chinese cultural background Compared with western culture, Chinese culture has been interpreted as a highly contextual culture that requires a greater sense of responsibility and power from leaders and an inborn top-town management structure (Wang 2000; Rogers 2004) M.Sc Thesis – Mao Mao (A0092543E) These characteristics can be observed clearly in Chinese state-owned manufacturers For example, in our research context, the process of culture retooling – compatibly translating and effectuating IS cultural resources to form a collective internal cultural repertoire – has been executed by headquarters all the way down to the subsidiaries Second, the pursuit of cultural retooling is prominent during the ES preimplementation stage Integrated ES implementation for a large corporation is costly, and its failure might be deleterious (Boudette 1999) For example, in 2004, HP centralized its disparate North American ERP systems onto one SAP system; this project eventually cost HP $160 million in order back logs and lost revenue, which was more than five times the project's estimated cost1 Therefore, to avoid substantial losses in the subsequent implementation, in the preparation stage, the organization should evaluate various aspects of business operations and culture to ensure implementation readiness Furthermore, cultural acceptance and readiness should be considered during the pre-implementation stage Prior empirical research has revealed that the early anticipation of ES implementation is essential for predicting the later execution of the project, and a negative attitude is detrimental to the overall implementation (Davenport 2000; Abdinnour-Helm, Lengnick-Hall et al 2003) Negative early attitudes are derived from internal conflict and resistance at the early stage of ES implementation As mentioned above, the uncertainty of a new context and awkwardness can trigger differences in values and routines related to the use of IT and IT capabilities when entering The source is CIO.com, “10 Famous ERP Disasters, Dustups and Disappointments”, by Thomas Wailgum, published on March 24, 2009 M.Sc Thesis – Mao Mao (A0092543E) into new cultural settings Therefore, to dissolve these types of internal conflict and resistance, organizations must identify their sources – discrepancies (Molinsky 2013a) – as an initial and necessary step for cultural retooling In this research, we aim to reveal an approach to identifying discrepancies for cultural retooling during ES pre-implementation Literature Review 2.1.ES Pre-implementation The existing literature on the preparation and implementation of enterprise systems is rich Past research has conceptualized and analyzed the difficulties created by business complexity and hierarchical structures; these should be anticipated during the pre-implementation stage For example, difficulties have been revealed in resource integration (Cohen and Levinthal 1990; Pan, Pan et al 2006), resource orchestration (Teece 2007; Kor and Mesko 2013) and capability integration (Hobday, Davies et al 2005) Apart from these topics, prior research has elucidated cognitive perspectives on IT implementation by expanding knowledge regarding user resistance and the internal conflict associated with IT project failures (Jiang, Muhanna et al 2000; Montoya-Weiss, Massey et al 2001) Prior studies also reveal that uncertain technology may trigger subconscious and instinctive resistance among the employees and subsidiaries of an organization (Lapointe and Rivard 2005) However, the majority of prior research was empirically conducted after IT had been implemented, and little research has been M.Sc Thesis – Mao Mao (A0092543E) autonomously and being actively involved in the subsequent ES implementation 6.3 Retooling Approach Different retooling approaches were incorporated based on the value and routine discrepancies and adapted for the participants As mentioned above, value is one of the core elements of organizational culture Due to the complexities of the combinations of value and routine discrepancies at a group level, we adapt retooling approaches from Molinsky’s research (2013a): we use the instrumental and integrative approaches for participants with different levels of value discrepancy According to Molinsky, the instrumental approach at a group level means that top management achieves task performance by forcing the participating groups to take steps toward their ought state (e.g., requirements from headquarters) During cultural retooling, this approach emphasizes the authority of the top management team and the legitimacy of the target implementation program The instrumental approach compels those participants with a higher level of value discrepancy (e.g., e-Thrival and Thrival Veges) In contrast to the instrumental approach, the Integrative approach means that the top management team helps the participating groups achieve task performance by finding a way to align their ingrained beliefs with the required performance (adapted from Molinsky 2013a) In other words, because the value discrepancies for this type of participant were lower, they can be retooled during the pre-implementation by arming and 54 M.Sc Thesis – Mao Mao (A0092543E) boosting the discrepancies with IT resources and capabilities (e.g., Thrival Foods and Thrival Meat) To be more specific in terms of the combinations of group level discrepancies, we extend the retooling approach adapted from Molinsky into levels of value and routine discrepancies In terms of value discrepancies, those participating groups with low levels of value discrepancy should be retooled through authorizing The low level of value discrepancies suggests that these participants are consistent and conform with the top management team Therefore, they have the highest potential to show a positive attitude (Coombs, Knights et al 1992; Davenport 2000) in the subsequent implementation Their intention should be authorized and encouraged to provide a positive and legitimized demonstration For those participants with high levels of value discrepancy, their discrepancies should be retooled by assigning Assigning represents a compulsory gesture by the top management team; it suggests that the top management team should use their authority and legitimacy to require execution and action from these participants to prove that they benefit from the overall integration and implementation Different approaches should be adopted for routine discrepancies according to their level Low levels of routine discrepancy suggest that the participants have rich resources and capabilities to address the implementation; the top management team should perform inciting for these participants Inciting suggests that the top management team encourages these participants to initiate their IT applications independently because their IT capabilities and resources allow them to orchestrate their IT development strategy (Teece 55 M.Sc Thesis – Mao Mao (A0092543E) 2007), and the benefit of an enterprise system would become vivid and tangible with the development experience For those participants with high levels of routine discrepancy, suggesting that they are currently incapable of implementing the ES, their retooling strategy during the pre-implementation stage would be incubating Usually, incapability occurs because of limited resources and capabilities (Meissonier and Houzé 2010) or the complexities of the business process By providing help and guidance, incubating serves to facilitate IT resources and capabilities; it also prevents the development of IT resources and capabilities that are in conflict with the requirements of the top management team Table 10 Identifying Discrepancies for Cultural Retooling in e-Thrival Value Discrepancy High – Remain isolated among all the Thrival subsidiaries And cannot sense the integrated benefit in food producing and processing Retooling Role Table 11 Identifying Discrepancies for Cultural Retooling in Thrival Veges Routine Discrepancy Value Discrepancy Low – Its business process relies much on IT adoption And it has a large group of IT professionals in its management team High – It remained relatively independent as newly merged And the management team did not sense the necessity of overall integrated system Rectification Field Though rich in IT resources and capabilities, e-Thrival did not embrace the idea of overall integrated enterprise system The headquarters incorporated eThrival into integrated system by transform its business process Retooling Role 56 Routine Discrepancy High – Though had several IT adoptions, they remained at elementary level and isolated to each other as well as difficult to integrate Extension Field The headquarters fostered the cooperation of Thrival Veges with other subsidiaries to reinforced Thrival Veges’s sense as a part of Thrival’s value chain Also, Thrival Veges’s business dynamisms were also considered in its IT development plan M.Sc Thesis – Mao Mao (A0092543E) Instrumental Approach The headquarters strategized for e-Thrival and incorporate it into the overall value chain the same with other producing subsidiaries Assigning for value discrepancy The headquarters accelerated the transformation of e-Thrival and Retooling made sure its trajectories Approach developing consistently with other subsidiaries Inciting for routine discrepancy The headquarters wished to export the experience and IT capabilities e-Thrival had to other subsidiaries and encouraged eThrival to refine its current applications Instrumental Approach IT department from the headquarters were participating in the internal IT development in Thrival Veges And the headquarters also urged Thrival Veges to integrate their production lines Assigning for value discrepancy Retooling Approach The headquarters provided Thrival Veges with IT resources under the condition for Thrival Veges in considering the integrated issues Incubating for routine discrepancy The resources offered by the headquarters prevent the misconstruing from the overall integration strategy Table 12 Identifying Discrepancies for Cultural Retooling in Thrival Foods Value Discrepancy Low – Consistent with the wish of the headquarters It has fully recognized the value of IT and was willing to make effort in overall integration Retooling Role Table 13 Identifying Discrepancies for Cultural Retooling in Thrival Meat Routine Discrepancy High – Has rich experience in IT development and business process reconstruction in cooperating with integration Demonstration Field Thrival Foods have been acknowledged as the most successful subsidiary in IT development and ES implementation It also continued refining their ES implementation Value Discrepancy Routine Discrepancy Low – Consistent with the wish of the headquarters, the top management team of Thrival Meat recognized the value of ES implementation High – Thrival Meat was unable to fulfill the requirements in implementing because of the lack of IT resources and capabilities Retooling Role 57 Fertilization Field Though Thrival Meat lacked of the IT resources and capabilities, if assisted with resources, the subsidiary will have a good chance to transform autonomously and actively involved into the later ES implementation M.Sc Thesis – Mao Mao (A0092543E) Integrative Approach The headquarters as well as the top management team encourage Thrival Foods by putting it into a prominent position in ES preimplementation Authorizing for value discrepancy The development plan was authorized and legitimized by the Retooling IT department of the Approach headquarters Incising for routine discrepancy The initiatives from Thrival Foods were usually supported since it has already got the confidence from the headquarters And the headquarters also wished Thrival Foods to set a good example to other subsidiaries Integrative Approach The headquarters energized Thrival Meat to achieve task performance by finding a way to make it feel authentic to perform with their ingrained beliefs Authorizing for value discrepancy The headquarters forged Thrival Meat believe it is appropriate and Retooling legitimate to be consistent with the Approach headquarters pursuing ES development and integration Incubating for routine discrepancy Incubating served as facilitation to IT resources and capabilities, it also prevent the development of IT resources and capabilities misconstruing against the requirement from the headquarters Conclusion 7.1 Theoretical and Practical Contributions When information technology is introduced within an organization, it often encounters cultural failings (Coombs, Knights et al 1992; Leidner and Kayworth 2006) Cultural failings derive from cultural misconstruction and resistance to the introduction of IT To overcome cultural failings, cultural adaptation can be an effective move for organizations (Harrison and Corley 2011) As an initial and critical step for cultural adaptation, cultural retooling prepares the participants for new cultural settings (Swidler 1986) This study offers an initial understanding of cultural retooling: the identification of discrepancies in terms of values and routines, which are then used to assign appropriate retooling approaches (Molinsky 2013a) 58 M.Sc Thesis – Mao Mao (A0092543E) Our study contributes to the prior research in terms of the following perspectives First, cultural adaptation has been viewed as a reactive (Smit and Wandel 2006) autonomous response to changes in environment and climate Our study highlights the proactive facet of cultural adaptation under the context of ES pre-implementation In a large corporation with complexities and multi-layers of subsidiary management, a strong top management team and headquarters are often needed to control the overall conformity and the collective cultural repertoire The proactive role of cultural adaptation can be demonstrated by the active execution initiated by the top management team or headquarters Secondly, prior cultural related research has tended to view culture as existing on separate levels and to reduce culture to values in an analysis (Hofstede 1980; Schein 1985) Our study offers a more solid and dynamic perspective of culture as an “open system” (Swidler 1986; Harrison and Corley 2011) to elucidate different behaviors by taking a cultural perspective under shared values Apart from viewing value as the core element of organizational culture, we posited that routine, as it relates to organizational resources and capabilities, is also a prominent factor in directing cultural change Thirdly, the majority of existing studies on cultural change focus on identifying the differences and distances between various cultural backgrounds The approach and process through which cultural change is enabled remains little understood (Molinsky 2013b) Our study fills this gap by offering an approach towards cultural retooling for cultural adaptation In adapting the retooling approach from Molinsky’s psychological cultural 59 M.Sc Thesis – Mao Mao (A0092543E) retooling (Molinsky 2013a), we extended this realm of concepts to a group level For practitioners, our study also reveals the complicated co-existence of value and routine discrepancies We provided a solid and concrete approach for practitioners to identify the value and routine discrepancies and thereby strategize the retooling approach and trajectories By using this approach, practitioners can better locate and dissolve the resistance and negative attitudes caused by internal value gaps and disparities in resources and capabilities 7.2 Limitations and Future Research This research certainly has its limitations First, in the retooling approach provided for the combinations of value and routine discrepancies, we generally view value and routine as elements affecting organizational culture However, under certain situations, value and routine discrepancies might interact with each other For example, during ES implementation, some of the value discrepancies were caused by the spontaneous resistance of participants due to the inconvenience of the new technology and the accompanying environment (Molinsky 2007) However, such spontaneous resistance may be derived from incapabilities and resource limitations formed by the existing routine Future research could emphasize the interaction between value and routine discrepancies in cultural change Second, restricted in terms of qualitative data, we were not able to collect information about the outcome of the retooling process According to the 60 M.Sc Thesis – Mao Mao (A0092543E) psychological process of cultural retooling, on which this study is based, Molinsky (2013a) proposed an expected outcome for each retooling approach – the instrumental and integrative approach Although our study found that organizations also take two types of retooling approach in addressing their cultural conflicts, our data did not allow us to further observe the outcome (e.g., higher and lower authenticity) of the retooling process and to then evaluate Molinsky’s proposition on an organizational level Future study can conduct empirical research to test the organization’s performance under the two retooling approaches In this research, we only explored the initial stage of cultural retooling Although Molinsky developed a psychological retooling process, the stages of organizational cultural change remain little understood Future research could explore the group level cultural retooling process to provide a practical and specific approach for cultural adaptation; alternatively, it could subdivide the stages of organizational cultural change and demystify the tensions and directions in cultural change 61 M.Sc Thesis – Mao Mao (A0092543E) Appendices Appendix A – Data Collection and Analysis in Three Phases I M.Sc Thesis – Mao Mao (A0092543E) Appendix B – Interview Information Table C-1 List of Interviewees and Positions Position (Department) VP and CIO VP and Director in IT and Strategy Development Department Vice Director in IT and Strategy Development Thrival Department Headquarters Senior Manager in IT and Strategy Development Department Manager in IT and Strategy Development Department General Manager e-Thrival IT Director Marketing Director Thrival Veges VP and IT Director VP and General Manager Thrival Foods Financial Director IT Director Thrival Meat VP and Financial Director Thrival Cereals VP and Financial Director Total Division II No 1 1 1 1 1 1 15 M.Sc Thesis – Mao Mao (A0092543E) Appendix C – Excerpt of Interview Topic Guides General question on Interviewee Please tell us about your background What is the role of your department? 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